comscore DoorDash changes tipping model after uproar from customers | Honolulu Star-Advertiser

DoorDash changes tipping model after uproar from customers

As DoorDash grew to become the biggest on-demand food delivery app in the country, it began doing something unconventional with customers’ tips: It used them mostly to subsidize its payments to delivery workers.

Even as it faced blistering criticism for the policy in February, DoorDash stuck with it.

No longer. DoorDash announced Tuesday night that it was dropping its tipping policy, which had effectively meant customers’ tips were going to DoorDash rather than the person who delivered their meal.

The decision followed another round of outrage and customer complaints about the policy after a New York Times reporter described in an article what it was like to work as a food-app deliveryman.

DoorDash’s reversal comes amid a broader debate about jobs and fair pay in the so-called gig economy, where workers have more flexibility but less stability and fewer benefits.

“Going forward,” DoorDash’s chief executive, Tony Xu, wrote on Twitter on Tuesday, “we’re changing our model — the new model will ensure that Dashers’ earnings will increase by the exact amount a customer tips on every order. We’ll have specific details in the coming days.”

For DoorDash’s 400,000 delivery workers, known as Dashers, the “specific details” hold the key to whether the decision actually increases the money that goes in their pockets.

Under the policy, which the company adopted in 2017, DoorDash began offering a guaranteed minimum payment for a delivery.

A tip paid through the app now went mostly to offsetting DoorDash’s contribution toward the guarantee, rather than increasing the Dasher’s pay.

DoorDash had said the system kept workers’ pay consistent when customers tipped little or nothing. For example, if DoorDash guaranteed a worker $7 for a delivery and a customer did not tip, DoorDash would directly pay the worker $7.

But if the customer tipped $3 via the app, DoorDash would directly pay the worker only $4, then add on the $3 tip so that the worker would still get only $7.

While the announcement is good news for customers who would like to think that their tips are going to increase a worker’s earnings, the implications are much less clear for the Dashers themselves.

On a forum for DoorDash workers on Reddit, some Dashers greeted the news with concern that DoorDash would simply pay them less to make up for the revenue it expected to lose after no longer being able to subsidize labor costs with tips.

“I’m worried that the orders will guarantee less now, but we get all the tips,” wrote a Reddit user named Dmillz648. “Meaning a previously guaranteed 10-dollar order might now only guarantee 5 bucks, and you get a 2 dollar tip, meaning you got 7 bucks for that order.”

“That’s my worry too,” replied a user named williams91. “And it saved me in times that I’ve been stiffed, so we’ll have to see the model. I’m nervous but excited.” A DoorDash spokeswoman did not immediately comment on whether the company would change its payouts to workers.

DoorDash, which was valued at $7.1 billion after a round of financing this year, has faced bad publicity about its tipping policy before.

In February, Instacart, a grocery delivery app, dropped a similar tipping policy in the wake of a shaming campaign, and DoorDash was pressured to follow suit.

At the time, Xu stood firm. “This is a model that is built with Dashers in mind,” he said then. “The pay model is meant to make sure every order is worth fulfilling.”

But after The Times published an article on Sunday about what it was like working for DoorDash and other food apps, the blowback reignited on social media.

Thousands of people blasted the company. Some swore they would tip Dashers only in cash from now on. Others said they had deleted the app altogether.

“I don’t believe that a single person intends to give a tip to a multibillion dollar venture-backed startup,” a tech journalist, Louise Matsakis, wrote in a tweet that was retweeted thousands of times. “They are trying to tip the person who delivered their order. This deceptive model should be illegal.”

All the other major delivery apps give workers 100% of tips, but their pay rates vary. In this reporter’s very brief experience as a food delivery worker for multiple apps earlier this year, I typically made more on DoorDash orders than on orders for Uber Eats or Postmates.

For Instacart workers, that company’s decision to scrap its unpopular tip policy has had mixed results. Some workers say that their pay has fallen.

In his Twitter thread on Tuesday, Xu wrote that DoorDash’s average contribution to Dashers did not change after it adopted the tipping policy it is now dropping. Before adopting that policy, the company had paid workers a flat fee per delivery, plus any tip from the customer.

DoorDash says that in its recent surveys of Dashers, they overwhelmingly preferred the current system to the flat-fee model.

“But it’s clear from recent feedback that we didn’t strike the right balance. We thought we were doing the right thing by making Dashers whole when a customer left no tip,” Xu wrote. DoorDash says customers do not tip 15% of the time.

“What we missed was that some customers who did tip would feel like their tip did not matter.”

Counting tips toward a worker’s wages is not a technique invented by tech companies. It is borrowed from the restaurant industry concept of a “tipped wage.” But restaurant employees are covered by minimum-wage laws and laws that limit the amount of tips that can be counted toward those wages.

In New York City, for example, restaurants are allowed to count up to $5 per hour of a worker’s tips toward the minimum wage, which ranges from $13.50 to $15 per hour.

There is no such thing as minimum wage in the piecework world of on-demand delivery.

Because delivery workers for apps are legally considered independent contractors, not employees — they set their own hours and can accept or reject any job, though they have no ability to negotiate rates — they have no wage protections.

But across the country, legislators and workers’ advocates are pushing for change.

The California Senate is considering a bill that would reclassify hundreds of thousands of gig-economy workers as employees. It is opposed by Uber and Lyft, the ride-hailing giants.

In New York, a city councilman, Brad Lander, said on Tuesday that he was working to create a living-wage requirement for delivery workers, but warned that it would be complicated.

In Madison Square Park in Manhattan on Wednesday afternoon, Courtney Melton, a food delivery worker, said she was still trying to figure out what the news might mean.

Whatever changes DoorDash makes, she said, “they’re going to put themselves first; that’s what a business does.”

Melton, 31, has worked for almost all the food delivery apps and said that she wished DoorDash had been more transparent about its tip policy.

“That’s why they got so much backlash,” she said. “All they had to do was be upfront. Just tell the consumer.”

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